Settlement Mills III: Goal of settlement mills is to settle quickly, often for low value

Matthew R. Arnold of Arnold & Smith, PLLC answers the question ” I have been injured on another person’s property. What should I do now?”

The legal system, by its nature, imposes certain standards, deadlines and costs that encourage personal-injury litigators to take on only the best cases—or cases with high values or those in which liability is uncontested.

That reality, coupled with other factors, has led to the establishment of some personal-injury legal practices that for the most part avoid litigation, endeavoring instead to settle clients’ claims as quickly as possible.

In an article published in the Hanford Sentinel, a Fresno, California-based attorney told personal-injury lawyer Dennis Beaver that claimants need to beware of “‘personal injury mills’ who advertise heavily on television and will take anything, looking for a quick settlement that is in their interest, not yours.”

Personal-injury or settlement mills have established, in essence, a niche market for low-value personal-injury claims. While the mills have the benefit of serving clients who may otherwise go without representation, many traditional tort lawyers criticize their practices, contending that they provide subpar representation and damage the reputation of lawyers.

In the October 2011 edition of the New York University Law Review, Nora Freeman Engstrom—an assistant professor at Stanford Law School—wrote that “personal injury mills” (Engstrom calls them “settlement mills”) operate “on the far end of a continuum of personal injury practice.” That is, the mills process claims on the low end of the compensation spectrum, claims other lawyers turn down because of low value. Lawyers turn down many low-value claims because the effort of a lawsuit, a trial and all that litigation entails are not worth the uncertain return.

Settlement mills, Engtrom writes, “advertise aggressively and settle what are usually low-stakes personal injury claims in high volumes, typically with little attorney-client interaction and without initiating lawsuits—much less taking claims to trial.”

In the article, titled “Sunlight and Settlement Mills,” Engstrom finds the rise of settlement mills astonishing, writing that while the business-model operates within the confines of traditional tort (“torts” are centuries-old legal doctrines that underlie most personal-injury claims), it has “quietly and improbably” delivered “to accident victims fairly certain and standardized sums at relatively low systemic cost.”

Engstrom details the “cookie cutter” approach taken by “settlement mill” law firms, noting that lawyers and staff rarely meet with clients; that cases are not investigated and lawsuits are rarely filed. Case values are based on formulas and are not correlated with actual injuries suffered by clients.

This “assembly-line model” is in stark contrast to the kind of detail-oriented representation provided by law firms in the traditional personal-injury litigation setting, where every lead is exhausted, no stone is left unturned, and no expense is spared in promoting a client’s interests. The trouble with settlement mills is, Engstrom writes, that many clients believe when they sign up that they are retaining the “old-fashioned conventional counsel.” This raises “profound issues of fairness and informed consent,” Engstrom warns.

It is not easy to find a good lawyer, and it is downright difficult to find a good lawyer to take a small case, Engstrom writes. Traditionally, the law has been a reputation business, a business of referrals by family, friends, associates, clients and former clients. That was until 1977, when the United States Supreme Court ruled in Bates v. State Bar of Arizona that bans on legal advertising were incompatible with the First Amendment. That cleared the way for attorneys and law firms to advertise aggressively. A partner from a Louisiana settlement mill told Engstrom, “I always thought it was crazy to have a referral system where you’re relying on Aunt Nessie’s neighbor’s postman’s baker to send you a case [when instead] I get on television, I tell people to call me, and they do.”

The lifting of the ban on attorney advertising opened the door to new legal business models and, in turn, opened the proverbial halls of justice to a new class of personal-injury claimants—those with small claims that may oftentimes be rejected by traditional firms. Settlement mills advertise more aggressively than traditional law firms and lawyers and derive most of their business from their advertising efforts. Studies show that while traditional-model personal-injury attorneys have on average sixty-to-seventy cases open at a time and serve in the range of one-hundred clients per year, lawyers at settlement mills serve anywhere from three-to-four times that amount.

Engstrom detailed two high-profile settlement mills—one from Texas and another from California—in her article, noting that the firms handled claims ranging in value from $1,000 to $20,000, tried to settle claims as quickly as possible—frequently within ninety to one-hundred-and-eighty days—and referred cases involving catastrophic injury or in which liability was contested to outside counsel. Clients rarely or never met with attorneys; most cases were handled, or “moved” by non-attorney staff members. One firm did not take a single case to trial over a period of six years. In general, the law firms were, ironically, places “where any connection to the formal law was highly tenuous.”

If you or someone you know has any questions regarding potential personal injury claims, feel free to contact the experienced personal injury attorneys at Arnold & Smith, PLLC in Charlotte, North Carolina for a free consultation. Call toll free at (955) 370-2828 or click here for additional resources.

Matthew Arnold is a Managing Member of Arnold & Smith, PLLC, where he focuses on the areas of family law, divorce, child custody, child support, alimony and equitable distribution.

Mr. Arnold was raised in Charlotte, where he graduated from Providence Senior High School. He attended Belmont Abbey College, where he graduated cum laude, before attending law school at the University of North Carolina at Chapel Hill on a full academic scholarship.

A board-certified specialist in the practice of Family Law, Mr. Arnold is admitted to practice in all state courts in North Carolina, in the United States Federal Court for the Western District of North Carolina, in the North Carolina Court of Appeals and Supreme Court, and in the Fourth Circuit United States Court of Appeals in Richmond, Virginia.

In his free time, Mr. Arnold enjoys golfing and spending time with his wife and three children.